Canada Inflation Research Brief

Broad-based easing in inflationary pressure. Headline and core inflation fell more than expected in August, recording the second consecutive softening in price growth. The headline rate declined by 60 basis points to 7.0 per cent, and the three core inflation measures followed, with an average decrease of 20 basis points, still well above the Bank of Canada’s 2.0 per cent target. While food prices reached a new high, lower gasoline costs caused by increased global oil production, coupled with a moderation in shelter price growth, continued to drive down inflation. If this trend continues, further easing is likely to be expected, as the third quarter Canadian Survey on Business Conditions suggests that increasing prices from the supply side have reached the peak. Additionally, late summer consumer demand has also leveled off, pointing to lower demand-driven pressures on inflation in the fall.